Finnish mobile-phone giant Nokia said on Tuesday evening that it had secured Chinese Government approval to make and sell handsets based on CDMA (code-division multiple-access) technology in China.

Nokia is planning to deliver its first CDMA handsets in China in the second half of this year, the company said.

The phones will be based on CDMA chips invented by Nokia itself instead of those of the United States-based Qualcomm, which claims to own most of the world's CDMA-based technologys.

The go-ahead is expected to lead to Nokia's expanding product line-up and to boost the firm's share in the world's largest cellular market, where there are more than 230 million mobile-phone subscribers.

Nokia sells twice as many handsets globally as its nearest rival, Motorola.

However, Nokia is believed to be trailing Motorola in China due to the Finnish company's lack of a CDMA licence.

Motorola sells phones in China based on both CDMA and GSM (global system for mobile communications).

Urpo Karjalainen, president of the Nokia (China) Investment Co Ltd, said: "Nokia plans to build an equally strong presence in CDMA in China as we currently have in GSM."

Analysts said they expect the firm's entry into the CDMA market to help Nokia close its gap with Motorola and head off increasing competition from Chinese handset makers.

Chinese manufacturers sold 13.9 million handsets in the first four months of this year, gaining a combined 51.3 per cent share of the domestic market.

However, both Chinese manufacturers and foreign giants are facing a tough market as their growth outlook is overshadowed by a looming glut in production, analysts said.

Other than Nokia, there are 19 licensed CDMA handset makers in China.

Thirteen Sino-foreign joint ventures and 17 domestic companies are licensed to produce GSM handsets in China.

Analysts predict that the combined annual production capacity of handset makers will reach 230 million units this year, representing a growth rate far outstripping demand.

The SARS outbreak has worsened the glut, with many potential buyers putting off going shopping.

The Chinese firm Eastcom saw sales of its handsets almost grind to a halt in Beijing during the worst of the SARS epidemic, an industry source said.

Aggressive price wars may break out in the second half of this year, analysts predicted.

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